CHAPTER 158 SENATE SUBSTITUTE FOR HOUSE BILL No. 2715* An Act relating to leases of railroad lands; establishing rights, duties, obligations and remedies for certain tenants of railroad land. Be it enacted by the Legislature of the State of Kansas:

Section 1. This act shall be known and may be cited as the ``railroad
leasing act.''

Sec. 2. As used in this act:

(a) ``Good faith'' means honesty in fact in the conduct of the trans-
action concerned;

(b) ``improvement'' means any public grain warehouse, building or
other structure permanently affixed to railroad land;

(c) ``lease'' means any agreement between a railroad and a tenant,
under the terms of which a tenant occupies the surface of railroad land;

(d) ``person'' includes an individual, corporation, government, gov-
ernmental subdivision or agency, business trust, estate, trust, partnership,
limited liability company, association or any other legal or commercial
entity and any successor or successors in interest thereto;

(e) ``public grain warehouse'' means any public warehouse or public
grain warehouse, as defined in K.S.A. 34-223 and amendments thereto;

(f) ``railroad'' means any railroad company as defined in K.S.A. 66-
180 and amendments thereto, and any successor or successors in interest
thereto;

(g) ``railroad land'' means any land acquired by a railroad in strips for
right-of-way and any parcel or tract acquired by a railroad adjacent to its
right-of-way, to aid in the construction, maintenance and accommodation
of its railway and which is occupied pursuant to a lease by a tenant who
owns improvements thereon;

(h) ``railroad operations'' means the movement, storage or servicing
of railroad equipment used for transporting persons or freight;

(i) ``successor in interest'' includes any agent, successor, assignee,
trustee, receiver or other person acquiring interests or rights in railroad
land, including, but not limited to, the owner or holder of any servient
estate or right of reversion relating to railroad land; and

(j) ``tenant'' means any public warehouseman, as defined in K.S.A.
34-223 and amendments thereto, or other person primarily engaged in
the sale or distribution of fertilizer or agricultural chemicals used or useful
in the production of agricultural crops, occupying railroad land in good
faith pursuant to a lease.

Sec. 3. (a) A lease shall contain terms and conditions which are rea-
sonable and just, and shall provide for a fair lease rental.

(b) Unless otherwise agreed by the parties to a lease, a lease shall be
for a term of not less than one year.

(c) A lease may not be terminated prior to the end of its term, except:
(1) By agreement of the parties; (2) by reason of a party's breach or default
in the performance of the terms and conditions of the lease, where the
defaulting party has been given written notice of default and a reasonable
opportunity to cure the default, but has failed to do so; or (3) where the
railroad land which is subject to the lease is reasonably needed by the
railroad for railroad operations.

(d) A lease may not require that one party to the lease indemnify,
defend or hold the other party to the lease harmless for liabilities caused
by the other party's negligence.

(e) A lease may require the tenant to remove the tenant's improve-
ments upon termination of the lease, in which event the tenant shall have
not less than six months following termination of the lease to remove such
improvements, and until such improvements have been removed, the
tenant shall pay monthly rent based on the annual rent specified in the
lease.

(f) A lease may provide for the imposition of a penalty and a reason-
able rate of interest, and interest may accrue if the tenant fails to pay the
lease rental when due under the terms of the lease. If a dispute arises as
to the lease rental provided in a lease renewal, no penalty shall be imposed
and no interest shall accrue during the time when the dispute is being
resolved pursuant to section 4 and amendments thereto, if the tenant
remains current on the rental required by the preceding lease.

Sec. 4. (a) All disputes regarding lease terms and conditions shall be
resolved by negotiation, mediation or, if necessary, by court action, as
provided in this act.

(b) The parties shall first negotiate in good faith to resolve each such
dispute. If each such dispute has not been resolved by negotiation within
60 days after negotiation is requested in writing, then upon the written
request of either party, the parties shall agree upon an independent, qual-
ified mediator to assist the parties in the resolution of each such dispute.
If the parties are unable to agree upon a mediator within 30 days after
such written request, then upon application of either party, the district
court shall appoint an independent, qualified mediator to assist the parties
in the resolution of each such dispute.

(c) If the parties are not successful in resolving a dispute arising under
a lease through negotiation and mediation, as provided in this section,
either party may commence an action in district court to resolve the dis-
pute.

(d) In any determination of fair lease rental of the railroad land, the
value of improvements owned by the tenant shall not be considered.

Sec. 5. (a) If a railroad unreasonably refuses to renew a lease,
whether or not the tenant is required to remove its improvements pur-
suant to the terms of the lease, or if a railroad terminates a lease pursuant
to subsection (c)(3) of section 3 and amendments thereto, the tenant
under the lease shall not be ejected from the railroad land, unless and
until the tenant is fully compensated by the railroad for the tenant's im-
provements.

(b) In the event any railroad land is sold, any lease shall be assigned
to the purchaser as part of the transaction, and the purchaser shall suc-
ceed to the rights and obligations of the railroad under the lease and the
provisions of this act.

(c) In the event any railroad land is abandoned by a railroad, any
person establishing a superior right or title to such railroad land shall be
deemed to be a successor in interest to the railroad for purposes of this
act and shall succeed to the rights and obligations of the railroad under
the lease and the provisions of this act. The tenant shall not be dispos-
sessed by any such person unless and until the tenant is fully compensated
by such person for the tenant's improvements, except that such person
shall have the right to set off any obligation then due to such person from
the tenant under the lease.

(d) Any dispute as to the amount of full compensation or as to a
railroad's unreasonable refusal to renew a lease, shall be resolved in the
manner provided in section 4 and amendments thereto.

Sec. 6. In any action involving a dispute arising out of a lease, if
unconscionability is put into issue by a party or by the court, the parties
shall be afforded a reasonable opportunity to present evidence as to the
setting, purpose and effect of the lease or any provision thereof to aid the
court in making the determination. If a court, as a matter of law, finds a
lease or any provision thereof was unconscionable when made, the court
may refuse to enforce the lease, enforce the remainder of the lease with-
out the unconscionable provision or limit the application of any uncon-
scionable provision to avoid an unconscionable result.

Sec. 7. The provisions of this act shall not apply to or affect any valid
lease entered into prior to the effective date of this act or to any renewal
or extension thereof on the same terms and conditions, but the provisions
of this act shall apply to and govern any renewal or extension of such lease
on any different term or condition or any material modification of any
such lease where such renewal, extension or material modification is ef-
fected on or after the effective date of this act.

Sec. 8. The provisions of this act are hereby declared to be severable.
If any provision of this act shall be found by the decision of a court of
competent jurisdiction to be invalid or unenforceable, such decision shall
not affect the validity of any other provision of this act.

Sec. 9. This act shall take effect and be in force from and after its
publication in the statute book.

Approved May 11, 1998

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